A magna cum laude
graduate of both Yale University and Harvard Law School, Ellis occupied
rarefied territory as a senior partner at the city’s largest law firm,
Stoel Rives. From his corner office high in the Standard Insurance
Center, Ellis advised the Northwest’s biggest companies.

Ellis won virtually
every legal honor available to him and devoted countless hours to civic
causes, including nearly 30 years on the board of Metropolitan Public
Defenders, which provides criminal attorneys for indigent defendants.

When
Ellis, 72, retired last year, he might have faded into a posh Palm
Springs life. Instead, he signed on as general counsel for Mercy Corps,
the Portland-based international aid organization.

But Ellis has spent
much of the past month fighting for his reputation, accused of 11
violations of the Oregon State Bar’s code of professional conduct. He’s
facing the charges along with his longtime colleague at Stoel Rives,
Lois Rosenbaum, 62, who succeeded Ellis as chief of the firm’s
securities practice.

The bar’s allegations
against Ellis and Rosenbaum boil down to this: that both are guilty of
conflicts of interest for representing FLIR Systems Inc. and dozens of
its employees—and protecting the company at the expense of those
employees.

The bar enforces
ethics rules for the state’s 14,000 licensed lawyers. When it pursues
charges of ethics violations, the issues are often mundane, the cases
low profile, and they’re often handled without much fanfare or expense.

But Ellis and
Rosenbaum now await judgment by a three-member panel in a rare ethics
trial—over whether or not they violated bar rules more than a decade
ago. Ellis and Rosenbaum (who faces nine charges) declined to be
interviewed for this story.

The battle between
the state bar and two powerful lawyers—with a big firm paying a small
fortune for their defense—has the state’s legal community watching.

“It is unusual for
two senior partners at a firm like Stoel Rives to get charged with
ethical violations,” says Mark Johnson Roberts, who chaired the bar’s
State Professional Responsibility Board in 2004.

“There is no statute
of limitations on these things,” Roberts adds. “It is unusual, but not
unheard of, to go after somebody 10 years later.”

Many lawyers who know
Rosenbaum and Ellis believe they did nothing inappropriate, and others
are surprised to see Ellis—who once sat on the state bar’s board of
governors—in the role of a defendant rather than sage counsel.

FLIR is a Wilsonville-based company known for its thermal
imaging and night-vision cameras and for being one of Oregon’s most
successful defense contractors. But in 2000, FLIR ran into a serious
problem: It overstated its revenues, and the company had to revise its
reports to the U.S. Securities and Exchange Commission.

FLIR, which is
publicly traded, soon found itself the target of shareholder lawsuits.
The company’s then-CEO, Ken Stringer, a 6-foot-9 former University of
Oregon basketball player, determined the company needed legal advice and
summoned Ellis and Rosenbaum to a March 2000 meeting at the University
Club downtown.

FLIR’s troubles were more complex than anyone realized.

“This one is a unique
event in Oregon,” Ellis testified at his and Rosenbaum’s ethics trial
this month. “Obviously it happens in Silicon Valley and New York and
some other places. But for Oregon companies, to the best of my
knowledge, this is the only time something of this magnitude and breadth
has occurred.”

Stoel Rives agreed to
handle the shareholder lawsuit, which quickly settled. But the SEC
opened an investigation and peppered FLIR employees with subpoenas.

Ellis and Rosenbaum
informed the SEC they’d be representing 40 FLIR employees and
executives, virtually everyone of significance except Stringer, who was
by that time out as CEO.

“We
believe there are potential conflicts of interest raised by your
representation,” Lori Echavarria, the SEC’s lead attorney on the case,
wrote to the Stoel Rives lawyers on July 20, 2001. “We are concerned
that the broad range of interests possessed by your many clients cannot
be adequately represented by a single attorney.”

In its charges
against the two lawyers, the state bar argues Ellis and Rosenbaum placed
FLIR’s corporate interests above those of its individual employees. The
bar also alleges Ellis and Rosenbaum failed to share information fairly
among clients and did not notify clients of potential conflicts.

Bar disciplinary rules state that lawyers cannot represent two clients who have opposing interests in the same matter.

In 2000, FLIR board
member Steve Wynne oversaw an independent investigation of the
accounting issues, and by March 2001 he believed (as he testified at a
later criminal trial) some of FLIR’s problems arose because “fraud
occurred.”

Ellis and Rosenbaum
pursued a settlement with the SEC on behalf of FLIR. Hoping to avoid SEC
sanctions for FLIR, the lawyers in March 2002 filed an explanation of
what went wrong and ways the company had fixed the problems—including
purging employees it held responsible.

“There is no way at
that point the same firm can represent the corporation and an employee
it has identified as guilty of fraud,” Eric Neiman, the bar’s lawyer
prosecuting Ellis and Rosenbaum, said at the attorneys’ ethics trial.

Among the employees
taking the blame was FLIR’s chief financial officer, Mark Samper, who
would later be penalized by the SEC and charged with fraud.

“Hard to believe this
was written by lawyers who represented Mark Samper,” Peter Glade, a
lawyer at Markowitz Herbold Glade & Mehlhaf who shared representation of Samper,
wrote of the filing Ellis and Rosenbaum made on FLIR’s behalf with the
SEC.

The
bar alleges Ellis and Rosenbaum did the same thing to other FLIR
employees: protected the company’s interests while exposing the
employees, ostensibly still their clients, to sanctions.

A subsequent criminal
case against Samper raised questions about how Ellis and Rosenbaum
represented him and other employees. In 2010, after Samper pleaded
guilty to a misdemeanor, the state bar filed ethics charges against
Ellis and Rosenbaum.

Neiman, the bar’s
prosecutor, told the trial panel Ellis and Rosenbaum failed in their
ethical duty to “constantly reassess during a case to see whether
interests have diverged.”

“The highest duty a lawyer has to a client is loyalty,” Neiman added. “This is a case about a loss of loyalty.”

In their testimony, Rosenbaum and Ellis strongly defended
their actions, saying they always disclosed potential conflicts of
interest; made sure those who wanted outside lawyers got them; and
ultimately provided the strongest possible representation to clients by
pooling the information learned in the representation of each for the
benefit of all.

“We didn’t favor one
client over another,” Ellis testified at his and Rosenbaum’s trial. “In
my mind, it was a perfect marriage of interests for us to represent the
employees at their interviews and be able to share that information with
the former officers that might have liability for past acts.”

Testifying with the faintly bemused air of a venerable professor, Ellis was politely defiant.

“I know people in my
position—the bar is coming after you, and you’re supposed to show
contrition and all of that,” Ellis testified. “I don’t feel contrition.
We did not do anything inappropriate, in my opinion. And I would not
change what we did.”

Rosenbaum, herself a veteran of 35 years of legal practice, was less restrained.